Internationally ‘influence’ was also being discussed in a paper by the Harvard School of Business and in the latest issue of Business Week where the cover page stated “What’s a friend worth”.

The Harvard Paper

The Harvard School of Business paper entitled Do Friends Influence Purchases in a Social Network? (by Raghuram Iyengar, Sangman Han, and Sunil Gupta) undertook research to to look at the influence of friends on purchasing decisions.

The Study

Using data from Cyworld, (a very popular Korean social networking site) the study empirically assessed if friends indeed influence purchases. Using 10 weeks of purchase and non-purchase data from 208 users they built an individual level model of choice (buy-no buy) and quantity (how much money to spend).

Findings

The key takeouts of the paper were:

There is a significant and positive impact of friends’ purchases on the purchase probability of a user.

The study identifies three distinct group of users

However, there are significant differences across users. Specifically, this social effect is zero for 48 percent of the users, negative for 12 percent of the users, and positive for 40 percent of the users.

“Moderately connected” users exhibit “keeping up with the Joneses” behavior. On average, this social influence translates into a 5 percent increase in revenues.

Highly connected users tend to reduce their purchases of items when they see their friends buying them. This negative social effect reduces the revenue for this group by more than 14 percent. This finding is consistent with the typical fashion cycle wherein opinion leaders or the elite in the fashion industry tend to abandon one type of fashion and adopt the next in order to differentiate themselves from the masses.

The researchers said: “…The members in high status group have an influence on those in the middle status group for the diffusion of a new product. However, a successful diffusion in the middle status segment may make high status members lose interest in the new product.”

The findings naturally have implications for the way you engage differing users within the social networks.

In addition to the Harvard paper above the cover story on the June 1 BusinessWeek edition, asks “What’s a Friend Worth?”

The article examines how “Companies are working fast to figure out how to make money from the wealth of data they’re beginning to have about our online friendships“.

The article is of note as it not only examines networked relationships in the external world (around social networks and marketing) but also examines them within companies from a knowledge management – KM perspective (ie how can we more effectively transmit knowledge around the organisation).

Many years ago when I was involved in developing Knowledge Management strategies understanding social network analysis theory and identifying the ‘connectors’ within an organisation was vital in understanding knowledge flow and who would ideally make the ideal ‘knowledge champion’ within each companyand division.

The same connector/influencer knowledge was then applied when I crafted Internal Communication plans – particularly around ‘Change Communications’ or introduced a new decentralised Intranet that need the ‘influencers’ involved.

Social Network Analysis (SNA) has been around for many years its not new but with the focus on online social networks researchers are now scrambling to crack the code.

About the Author: Jenni Beattie is the Director of Digital Democracy a Sydney based Social Media Consultancy . Enjoy the article? please subscribe to the RSS Feed